Draft EIS released for Liberty offshore project

A proposed Arctic offshore oil development project by Hilcorp Energy would entail building a 24-acre island in 19 feet of water to access a field of oil containing 330 million barrels of oil that could reach peak production of 70,000 barrels per day. (Rendering/Bureau of Ocean Energy Management)

Houston-based Hilcorp and its partners in Liberty — BP and Arctic Slope Regional Corp. subsidiary ASRC Exploration LLC — are planning to construct a 24-acre gravel island in the federally-controlled shallow waters about six miles offshore and just east of Deadhorse in the Beaufort Sea.

The island would allow Hilcorp as the project operator to access the up to 330 million barrels of light crude the companies believe are in place. With 16 wells, Hilcorp expects it could recover 41 percent to 48 percent of the oil in place. Peak production could hit up to 70,000 barrels per day a couple years after initial production, according to the company’s Alaska leaders.

Liberty would produce for 15 to 20 years based on the current reserve estimates.

The oil would be moved to the Trans-Alaska Pipeline System, or TAPS, through a 12-inch diameter pipeline that would tie in to the eastern Slope Badami transport line.

About 5.6 miles of the roughly 7-mile Liberty pipeline would be a subsea line, buried and installed during the winter. The subsea portion of the 12-inch pipeline would also be contained within a 16-inch pipe, drawing on a technique used at other North Slope manmade island oil developments.

With a 24-acre seafloor footprint, the island, in 19 feet of water, would have a working surface of 9.3 acres, according to the 1,270-page draft EIS.

Hilcorp has pointed to the four large existing North Slope oil development islands — Endicott, Spy, Oooguruk and Northstar — as strong evidence that Liberty can be done safely.

“Not only have similar proposals of the Liberty project been vetted and approved before, but gravel-based energy facilities have a proven record of safe operations, with some in production for over a decade in the Beaufort Sea,” Hilcorp Alaska Senior Vice President Dave Wilkins said in a joint release. “We are eager to work with the communities across the North Slope and our partners throughout the state to develop a project that will greatly benefit Alaska and bring greater domestic energy security to the country.”

ASRC Lands and Natural Resources Vice President Richard Glenn said Liberty is the kind of project the company has determined is important for its region and “through local participation we can ensure that the needs and issues of our communities and shareholders are addressed.”

Hilcorp is majority owner and operator of the Northstar and Endicott fields, after purchasing BP’s interests in them in a 2014 deal that also gave it a 50 percent interest in Liberty. BP subsequently sold 10 percent of its stake in Liberty to ASRC Exploration.

BP purchased Liberty from Shell in 1996 after Shell discovered the prospect with four exploration wells in the mid-1980s. BP first planned to build an island to develop Liberty but put those plans on hold in 2001 to further study the project, according to the draft EIS.

In 2005 the London-based oil major proposed drilling ultra-extended-reach wells from onshore to eliminate the need for an island and minimize the project’s impacts on Alaska Native subsistence whaling hunts in the area. That plan was scrapped in 2012 and Hilcorp subsequently took over the project in 2014.

Gov. Bill Walker submitted a letter to BOEM in October 2015 supporting Hilcorp’s plan during the public comment period to determine the scope of the EIS. Walker wrote that the oil produced from Liberty would help extend the life and increase the operational efficiency of TAPS.

Liberty would indeed be a boost to TAPS, but it would not do much for the state treasury because it is in federal waters. BOEM estimates the project would generate nearly $1.5 billion in federal lease and royalty payments — in 2015 dollars — over its operating life. The State of Alaska’s share of that revenue would be about $400 million, with another $15 million generated in state corporate income taxes and $3 million in state property taxes from the onshore facilities.

The North Slope Borough would receive about $35 million in estimated property taxes from Liberty.

BOEM’s alternatives to Hilcorp’s proposal include moving the island 1 to 1.5 miles to avoid the densest area of the “Boulder Patch,” an area of the seabed with small boulder substrate that “supports the richest and most diverse biological communities in the Beaufort Sea,” the draft EIS states.

Moving the island 1.5 miles into state waters would lengthen the wellbores necessary to reach the oil reservoir by 3,300 feet to a length of 17,200 feet, according to BOEM.

Another option the agency is considering would move the oil processing facilities to the manmade Endicott Island that Hilcorp operates about eight miles to the northeast of Liberty. Moving Liberty oil processing to Endicott was suggested after EIS scoping period comments asserted doing so would minimize impacts to marine life and subsistence harvests around Liberty by reducing noise and vibrations from the island, according to BOEM.

Kuukpik Corp., the Alaska Native village corporation for the North Slope village of Nuiqsut wrote in a 34-page March 2016 letter submitted to BOEM as public comments that the EIS should closely examine the impacts of abandoning the pipeline and leaving the island in place once production from Liberty has ceased.

While Kuukpik President Isaac Nukapigak wrote the company neither supports nor objects to Liberty, it would eventually like to see the island area restored.

“Leaving the island to slowly drift apart would almost certainly cause navigation hazards in this critical travel corridor in the short-term at least,” Nukapigak wrote.

Doing so would expose the Boulder Patch to artificial debris, he contended.

“The only apparent justification for failing to remove this island is to cut costs. If there’s not more to it than cost savings (Hilcorp) should be required to remove the gravel that it wants to dump in this marine environment,” he continued.

He concluded his letter by noting that Kuukpik is concerned about the impacts the building a gravel island in what is an important whaling area for North Slope Alaska Natives would have, urging BOEM “to proceed slowly and methodically” to ensure the agency’s review of Hilcorp’s proposal is as complete as possible.

Kuukpik shareholders are also shareholders in ASRC, which holds the 10 percent interest in Liberty through its exploration subsidiary.

The possibility of drilling into the Liberty oil reservoir from onshore was not advanced and given only cursory consideration because it would require drilling wells that would be nearly a mile longer than the current world record wellbore of 40,602 feet, the draft EIS states.